The new income tax rule (TCS) introduced on foreign exchange transactions under LRS (Liberalised Remittance Scheme), which was supposed to be effective from April 1, 2020, and was extended till October 1, 2020, has also been amended.
Under the LRS, all resident individuals, including minors, are allowed to freely remit/avail foreign exchange facility up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.
Here are the new provisions as per The Finance Act, 2020:
• Tax Collected at Source at 5% shall be applicable be applicable on amounts in excess of ₹7 lakhs in a financial year and not on the total amount.
• For transfers from Resident Individual Account to NRO Account towards gift/loan, TCS will not be applicable and the amount transferred will not be subsumed under the aggregate threshold limit of ₹7 lakhs per FY.
• For remittances towards pursuing overseas education, TCS at 0.5% shall be applicable, if the amount remitted is obtained through a loan from a financial institution.
• For remittances to Foreign Tour Operators through the bank, 5% TCS of the total amount remitted shall be applicable and the amount remitted will not be subsumed under the threshold limit of ₹7 lakhs.
•The TCS rates mentioned above are to be increased by applicable surcharge as well as Health and Education Cess in case a remitter is non-resident as per the Income-Tax Act, 1961.
